New York City has a well-earned reputation for being one of the most expensive housing markets, with some New Yorkers shelling out up to at least 30 percent of their income for housing. Fewer know, however, that New York City has been helping coop and condo owners address this price pressure through NYC Condo/Coop Tax Abatement Extensions, which cost New York City about $500 million annually in tax revenue. These large tax credits (ranging from 17.5 percent to 25 percent for 2012) must be renewed every three years, raising the blood pressure of many New York City residents as they wait to see whether these tax abatements will survive the budgetary process. Indeed, the New York legislature left the latest bill in limbo when it adjourned last year, and the costs incurred from Hurricane Sandy had many worried that there would simply not be enough funds left in the budget.
We have good news to report: the New York State Legislature recently passed an Omnibus Housing bill that renews the coop and condo tax abatement for another three years, and Gov. Cuomo signed it into law on February 1. As before, these tax abatements are limited to those whose coop or condo is their primary residence (with some provisions for owners who own up to three units, provided they are in the same building and one of the units is the owner's primary residence). These tax abatements will also have a positive effect on the recovery of New York City housing market, as first time home buyers, who represent a significant portion of the current market, would likely not have been able to afford the net increase in housing cost.
The Omnibus Bill has also removed some roadblocks that should result in the completion of stalled housing projects in the 15 FAR districts in Midtown and Downtown Manhattan. Modifications that were made in 2007 accidentally omitted 421a program benefits, which had been in place since 1993. The restoration of flexibility in the completion of construction provisions should also result in new residential development in these high density areas.
A related program, J-51, provides a tax benefit for the renovation of existing housing, and it also has been extended for three years. Amendments to this program, however, have eliminated credits for the conversion of commercial space for residential use and limited condominium and cooperative building eligibility for units whose average assessed value is greater than $30,000. Projects and conversions receiving "substantial government assistance," which is defined to include city, state, or federal loans or grants, are not subject to this cap.
We want to acknowledge the vital role that the Real Estate Board of New York (REBNY) has played in pushing this bill through the legislative process in a timely fashion. For questions on this topic or anything else relating to NYC Real Estate, leave a comment in the notes or email toni@elliman.com.
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